Bank Fees Vs Payday Loans

With all the talk these days about Payday loans, banks have jumped on the band wagon touting the negative things about Payday loans.

Yet if we pull back the curtains on the banking industry, are they really any better? Washington Mutual, yes, my former employer offers almost everyone who opens an account a $100 overdraft limit.

If your checking account is handled well, it quickly increases to high amounts, ranging from $500-$1500 on average for the accounts I worked with.

This simple 'overdraft limit' allowed a consumer to make one small error in their checkbook register and bounce multiple checks which were in turn paid by the bank. The sneaky part is they were paid into the negative up to the limit of that overdraft limit and charge a large fee for each item that was presented.

Daily I viewed accounts that had been charged $100 or more in fees, and the customer wasn't aware of it for several more days until the notice arrived in their mail box.

Is this any different than what a Payday Loan company charges? The main difference that I see is the consumer is aware of the fees up front! Not after the fact!

I suspect if we did the math, these overdraft charges far exceed the calculated interest rate on a Payday loan.

An overdraft account is not exclusive to just Washington Mutual. I contacted several large banks to comparison shop products and was surprised that most financial institutions offer a similar program. At the time I used WAMU, Wells Fargo, Bank of America, and US Bank.

As a consumer, you need to be aware that these accounts are out there and you probably have one without realizing it. Automatic Teller Machines also known as ATM's often allow you to access those funds.

The average cost of an overdraft or returned item fee ranges from $25 to $35 dollars. The actual cost of the overdraft or returned item to the financial institution is well under $5. Most financial institutions have trained their staff to tell you the following if you complain:

* We only reverse fees if it is a bank error.

* The fee is only there as a deterrent, to encourage people not to overdraw an account.